Social Media – Is it a Dot Com Bubble 2.0?
May 1, 2011

Many of us may remember the growth of bubble and the subsequent burst of the bubble whose repercussions are being felt by technology and Internet companies till date.

So the question is what makes something a bubble? In simple terms, a bubble is something that has a very thin film around a space of air. As the air increases inside, the thin film keeps expanding, and depending on the adhesion, surface tension of the material of which this thin film is made of , the bubble can expand very fast. Once a certain level of surface tension is reached, the bubble bursts or if a very small speck of dust comes in touch with the thin film, it changes the cohesive forces of the film and the bubble bursts and disappears.

Now let’s look at the Bubble 1.0 – The Internet technology had just been out of the academic and military research labs into the hands of the commercial world.  The Web started to grow and the key factors the investors, the companies were looking were the number of eyes balls or unique visitors that come to the view their site, portals or web property. Some used cool techniques to get those impressions like the carpet bombing of CD’s by AOL, the use of taglines in every piece of email  “Free Email by Hotmail”  (the Viral marketing approach) among others. The companies who got exponential growth in their visitors saw their stock prices soar, and valuation of companies increased exponentially.  That was the rise of Bubble 1.0. However, the customer base got saturated and the surface tension in the form of competition grew when the thin layer on top of Internet technology companies just crashed and the bubble broke and shattered the dreams of many people.

At present, the Social Media, to me feels like a Bubble 2.0.  For example, pioneers of Social Media 2.0 (SM 2.0) – companies like MySpace, Twitter, Facebook, YouTube, etc. all have touted exponential growth of their user base in last few years. The stock market and the investor community has acted in the same manner as they did during the era 1.  The investors are looking to put more money in SM 2.0 companies, thinking the success of new ventures could be a repeat of growth like those of the above-mentioned pioneers. However, I see that the stress is slowly creeping in to the psyche of the SM 2.0 users. For example, the users are getting tired of creating ‘avatars’ in various platforms and being equally engaged and active in them.  Unlike some celebrities who are provided a perception of being engaged in all SM 2.0 network by using paid writers.  The earlier stars like MySpace and Twitter are having challenges in growth areas.  I feel it is a sign that the Dot Com Bubble 2.0 is reaching it’s critical expansion limit? What is going to be the trigger that will burst this bubble? I leave it to the audience to think about it. The burst of Dot Com 2.0 is imminent, the timing is anybody’s guess. However, I feel timing is soon, for the following reasons:

  • The SM 2.0 is a crowded space, where many of the players add little to no value.
  • The users base is overwhelmed by the irrelevant content provided by 1000’s of connected users. (Analogous to email spam)
  • Friend or Friend of a Friend definition has changed for the worse in SM 2.0, and SM 2.0 platforms are not providing good filters (unlike LinkedIN).
  • Enterprises do not see value in SM 2.0, even many Internet companies do not understand SM 2.0 value.
  • Users have preferred SM 2.0 network, even though they exists in all or many networks. The inter connectivity of networks is not easy.

However, few SM 2.0 players can have a long life, if:

  • Interoperability between networks become smooth and simple.
  • Enterprise promotes the usefulness of ‘real-time’ collaboration using SM 2.0 internally.
  • Secure SM 2.0 for internal data sharing, while monitoring external SM 2.0 networks.
-Satyam 4/29/11 @Cafe in VHC, Arlington, VA